Adam Smith and The Market Economy
competition among businesses
tends to lower prices and raise quality
wealth of nations
British philosopher and writer Adam Smith's 1776 book that described his theory on free trade, otherwise known as laissez-faire economics.
market economy
Economic decisions are made by individuals or the open market.
profit motive
an incentive for businesses to produce what consumers demand and to produce those goods and services efficiently - keeping costs down - in hope of earning greater profit
Adam Smith
author of The Wealth of Nations, is often called the "father of economics."
limited government
that acts as a referee protecting: consumers, workers, yhe environment, and competition in the marketplace
invisible hand
that people, acting in their own self-interest, would work hard and produce what consumers want as if directed by a ___________
division of labor
the breaking down of a job into separate, smaller tasks to be performed individually. leads to better quality, quantity and speed
consumer sovereignty
the concept that consumers' "dollar votes" tell businesses what to produce
private ownership of resources
the right to exclusive use, legal protection against invaders and the right to transfer property to others
prices are determined in markets
through the interaction of supply and demand
specialization
when people focus on producing a few things instead of making everything they want by themselves. leads to better quality, quantity and speed